New Jersey Administrative Code
Title 11 - INSURANCE
Chapter 4 - ACTUARIAL SERVICES
Subchapter 30 - ACCELERATED DEATH BENEFITS
Section 11:4-30.5 - Surrender (total or partial)
Universal Citation: NJ Admin Code 11:4-30.5
Current through Register Vol. 56, No. 18, September 16, 2024
(a) Under the surrender approach, the owner of a policy or certificate is permitted to accelerate the payment of all or part of the death benefit, as specified in the policy or certificate, through the acceleration of (all or part) of the death benefit. Under this approach, the cash value, if any, is reduced by the same percentage as the death benefit.
(b) The following requirements apply to accelerated death benefit provisions which utilize the surrender approach.
1. The amount of the accelerated death
benefit may be applied to repay an outstanding policy or certificate loan but
only up to the amount of the outstanding loan multiplied by the percentage of
the death benefits which have been accelerated. For example, where an owner has
a death benefit of $ 100,000 with an outstanding policy loan of $ 20,000 and
seeks to accelerate the payment of $ 25,000 or 25 percent of the death benefit,
the $ 25,000 may be applied to repay up to 25 percent of the outstanding loan
of $ 20,000. Thus, of the $ 25,000 accelerated payment, $ 5,000 may be applied
to repayment of the loan and $ 20,000 may be paid to the owner.
2. The premium is proportionately reduced to
reflect the amount of insurance remaining in effect and may be further reduced
according to some specified formula, or become paid-up.
3. The insurer may pay the owner a present
value of the death benefit which is being accelerated. The interest rate or
interest rate methodology used in the calculation shall be disclosed in the
policy or certificate and actuarial memorandum. The maximum interest rate shall
not exceed the greater of:
i. The yield on
the 90-day Treasury bills available on the date of application or of the
accelerated payment, whichever is greater; or
ii. The maximum adjustable policy loan
interest rate based on the Moody's Corporate Bond Yield Averages-Monthly
Average Corporates published by Moody's Investment Services, Inc., or successor
thereto, for the calendar month ending two months before the date of
application for an accelerated payment. The policy loan interest rate is that
which is permitted under the NAIC Model Policy Loan Interest Rate Bill, Model
#590.
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